I am experiencing an increasing number of inquiries about what it takes to get my personal help in learning, implementing and/or managing an upgraded marketing and sales effort at your practice or firm.
Since the idea of this blog isn’t to sell stuff, I’ll make the answer succinct. If any readers want more info, you are welcome to contact me directly.
I prefer to conduct teaching sessions or facilitations on Mondays or Fridays. Southwest/coach and the Holiday Inn are fine. I eat everyday whether I work or not, so I don’t expect you to pay a per diem for meals and incidentals. My daily rate is $1500, whether working with an individual or group. Groups of more than about ten are generally too cumbersome to do much more than teach generalities. The smaller the group, the more individual instruction there can be.
Thanks. I appreciate the interest you have shown in CPA Practice Builder and the underlying process. Keep sending in your success stories. By the way, the blog topic ideas have slowed down … if you want me to write about any particular aspect of accounting practice business development, please let me know.
To your success and wishing you all a speedy recovery from tax season!
Craig
Cell 510-915-0529
Email craig.cpabizdevel@gmail.com
Friday, February 26, 2010
Wednesday, February 24, 2010
A (Really) Big Client Can Be Risky
Over the years I’ve had two client firms that lost large clients with little, if any, warning. By “large clients” I mean a single large client that comprised at least a quarter to a third of the firm’s revenue. The resultant disruption to these firms presented a nightmarish challenge to firm management. Severe and rapid downsizing of personnel, the need to somehow reduce the costs associated with excessive office space, loss of skills as staff departed, the necessity for partners to contribute capital to the firm, staying within bank line covenants, etc., etc. occupied the partners almost 24/7. And, needless to say, all the other clients continued to expect high quality, timely accounting services.
The prospect of acquiring a (relatively) very large, prosperous client is incredibly seductive. For many firms this becomes a crowning achievement, allowing the partners to feel they have finally “arrived.” One partner told me about his human, gut-level reaction: that it was good to be playing on the same field as the bigger firms; that he no longer felt like a small timer. And the financial benefits can be considerable – a significant percentage of the revenue surge falls to the bottom line; cash flow improves, staff is fully utilized, profits blossom, bonuses increase and life becomes good.
That was exactly the experience of the owners of the two firms I noted above. And then the party ended. Suddenly and badly. I wanted to talk with them both about their experiences, but waited until the dust settled and the wounds had at least stopped bleeding. When the opportunity arose I asked, “What would you do differently if faced with the same situation today?”
First, let’s be clear. As a general statement, neither would turn down the client. However, they both would take steps to ameliorate the potential downside should a sudden, similar withdrawal occur. A number of possible actions were mentioned, including temporary and/or part time staff, client-specific staff, temporary extra office space that is available on short term lease or even month-to-month, farming out certain parts of the job to others (one specific suggestion was to outsource any and all personal returns associated with the client), etc.
The bottom line was that they would avoid undertaking an expansion that had the consequences of permanency and/or increased financial commitment (e.g. long term lease of much bigger facility, etc.) until such time as the rest of the firm’s business – excluding the big client – could support it. They would also refuse to take on a large client whose business was not very similar to their current focus and capabilities. It is much easier to upsize or downsize if the skill sets of the staff overlap. For example, a mainstream 1040 and small business practice might think twice about taking on a disproportionately large non-profit.
I’ve encouraged you to expand your business development efforts during this recession because I am aware so many of your competitors are not being aggressive seeking business, instead looking inward and focusing upon cost containment. This represents opportunity for readers of this blog, who clearly are interested in seeking new business. And never doubt for a minute that the process described and taught in the CPA Practice Manual (and the version for ProfitCents subscribers) that most of your have purchased is more than capable of securing these premium prospects as clients for your firm.
So, please, set your sights upward. If there is that guy you see every now and then who owns the industrial crane company at the edge of town with what looks like a hundred cars in his parking lot every weekday, target him for some personal marketing. We’ve talked about it here in the blog and the process is explained in your manual. Trust me, it is worth your time. There is no downside. And, who knows, you may just get the opportunity to take him on as a client.
But if he is suddenly going to be a huge fish in your pond, how are you going to expand your capability to service his needs? How can you do it so if it all turns upside down it won’t destroy your practice?
Well, one way is to get another big client. Or two. Or three. Spread the risk that way. Remember, big clients tend to give you big referrals, so it can happen. So, the point of this post is twofold: a) don’t bet the farm on one big client; instead hedge your permanent commitment(s) and, b) you can land these big prospects, and now’s a good time to go for it.
The prospect of acquiring a (relatively) very large, prosperous client is incredibly seductive. For many firms this becomes a crowning achievement, allowing the partners to feel they have finally “arrived.” One partner told me about his human, gut-level reaction: that it was good to be playing on the same field as the bigger firms; that he no longer felt like a small timer. And the financial benefits can be considerable – a significant percentage of the revenue surge falls to the bottom line; cash flow improves, staff is fully utilized, profits blossom, bonuses increase and life becomes good.
That was exactly the experience of the owners of the two firms I noted above. And then the party ended. Suddenly and badly. I wanted to talk with them both about their experiences, but waited until the dust settled and the wounds had at least stopped bleeding. When the opportunity arose I asked, “What would you do differently if faced with the same situation today?”
First, let’s be clear. As a general statement, neither would turn down the client. However, they both would take steps to ameliorate the potential downside should a sudden, similar withdrawal occur. A number of possible actions were mentioned, including temporary and/or part time staff, client-specific staff, temporary extra office space that is available on short term lease or even month-to-month, farming out certain parts of the job to others (one specific suggestion was to outsource any and all personal returns associated with the client), etc.
The bottom line was that they would avoid undertaking an expansion that had the consequences of permanency and/or increased financial commitment (e.g. long term lease of much bigger facility, etc.) until such time as the rest of the firm’s business – excluding the big client – could support it. They would also refuse to take on a large client whose business was not very similar to their current focus and capabilities. It is much easier to upsize or downsize if the skill sets of the staff overlap. For example, a mainstream 1040 and small business practice might think twice about taking on a disproportionately large non-profit.
I’ve encouraged you to expand your business development efforts during this recession because I am aware so many of your competitors are not being aggressive seeking business, instead looking inward and focusing upon cost containment. This represents opportunity for readers of this blog, who clearly are interested in seeking new business. And never doubt for a minute that the process described and taught in the CPA Practice Manual (and the version for ProfitCents subscribers) that most of your have purchased is more than capable of securing these premium prospects as clients for your firm.
So, please, set your sights upward. If there is that guy you see every now and then who owns the industrial crane company at the edge of town with what looks like a hundred cars in his parking lot every weekday, target him for some personal marketing. We’ve talked about it here in the blog and the process is explained in your manual. Trust me, it is worth your time. There is no downside. And, who knows, you may just get the opportunity to take him on as a client.
But if he is suddenly going to be a huge fish in your pond, how are you going to expand your capability to service his needs? How can you do it so if it all turns upside down it won’t destroy your practice?
Well, one way is to get another big client. Or two. Or three. Spread the risk that way. Remember, big clients tend to give you big referrals, so it can happen. So, the point of this post is twofold: a) don’t bet the farm on one big client; instead hedge your permanent commitment(s) and, b) you can land these big prospects, and now’s a good time to go for it.
Monday, February 15, 2010
Can Business Development Help Me Maintain My Fee Level In Today’s Business Climate?
There’s a lot of talk about fees in the blogosphere, with the primary questions being, “Can I raise fees? Keep fees where they are? Reduce my fees?”
Most accountants are experiencing significant downward fee pressure from clients. This pressure can be quite direct, e.g. “Brenda, my business is down and cash is tight. I can’t pay these fees. We’ve got to work something out,” or it can be indirect, i.e. the client either slow pays, doesn’t pay, or sends partial payments. In the latter instance the ball is typically in your court to contact the client and see what can be done. When that conversation occurs, the odds are they will ask for some form of relief.
Or, you may simply take the initiative and write down the invoice before you send it. Here’s a strategy you might consider when considering a write down: As noted in a post last year, I had been told by some accountants that they obtained the best results when making a write down if they clearly showed on the invoice that they were doing so. It is appropriate for the client to see what the amount should have been because from a service provider standpoint you always want the client to understand the reality of how much effort it takes to do their work. Several clients use the phrase, “professional courtesy” as a way to label the amount written down, e.g. the invoice gross billing is $6,500, then subtracts ($1,500) as a professional courtesy, and nets the amount due as $5,000.
By doing this you retain the ability to defend a future “increase” in fees by pulling out the prior invoice and showing the client that you discounted the amount due because you were, for example, aware of the client’s cash and margin problems and you value their business and elected to give them some relief. If necessary, you explain that this clearly implies that you were not offering a permanent, go-forward reduced fee structure.
No one I’m talking with has raised fees across the board for 2010. From that I would state the obvious and recommend you stand pat. I wouldn’t reduce fees because it is so difficult to raise them when the business climate recovers. Using the write down process retains your fee structure while at the same time provides you the opportunity to give selective relief to individual clients.
Now, because this is a business development blog, I want to pitch a way you CAN raise fees. To explain, if you are doing “regular” 1040 and small to medium business returns and compliance work, you are to some extent engaged in a commodity activity. Most of your competitors also provide these services. Your clients know this and everyone is aware there is a community standard range of how much you can charge for that work.
However, when you provide consulting, advice or engage in project work the standard is considerably grayer. If you don’t already do so, please consider scheduling look-ahead planning meetings with (at least) your important clients. And don’t limit your discussion to just the business stuff. Instead, ALWAYS ask about life issues the client may have. For example, if the client is in their 50s or 60s you inquire about their desires about retirement timing, or their thoughts about disposition of their business, etc.
All manner of opportunities can arise from these discussions. Project work such as cash projections, what-if scenarios, coordinating with attorneys re estate planning, etc. are all possibilities. Or, the client may inquire, “Victoria, I’d like to explore how I can acquire one of my competitors. Obviously, there’s the price, but what’s the best way to structure payment of the price? How do we allocate value of, say, good will, inventory and so forth? Does the transaction’s timing have any effect upon my tax exposure?” Obviously, this discussion can result in both project work and consulting/advice. To my way of thinking, these are premium services. This is you operating at your highest professional level. My belief is that by developing these options and solutions you are providing maximum value to your client. You should charge accordingly.
In fact, every accountant I presently work with charges a higher hourly rate (when compared to everyday work) for consulting, advice and project work. Take a look at the hourly rates of local attorneys. While you probably won’t be able to get the same level, their rates do provide a reference point. Specific locations will vary, but as one example, in San Francisco, my clients employ a two-tier structure that pegs their rates $50 - $100 more per hour more for these premium services.
I believe that even in today’s recession you will find clients who not only value the expertise you bring to the table, but will pay your invoice and consider it money well spent.
Note: there are two relevant earlier blogs that address fees: See Pressure To Lower Fees, Parts 1 and 2, dated 7/30/09 and 8/09/09 respectively.
Most accountants are experiencing significant downward fee pressure from clients. This pressure can be quite direct, e.g. “Brenda, my business is down and cash is tight. I can’t pay these fees. We’ve got to work something out,” or it can be indirect, i.e. the client either slow pays, doesn’t pay, or sends partial payments. In the latter instance the ball is typically in your court to contact the client and see what can be done. When that conversation occurs, the odds are they will ask for some form of relief.
Or, you may simply take the initiative and write down the invoice before you send it. Here’s a strategy you might consider when considering a write down: As noted in a post last year, I had been told by some accountants that they obtained the best results when making a write down if they clearly showed on the invoice that they were doing so. It is appropriate for the client to see what the amount should have been because from a service provider standpoint you always want the client to understand the reality of how much effort it takes to do their work. Several clients use the phrase, “professional courtesy” as a way to label the amount written down, e.g. the invoice gross billing is $6,500, then subtracts ($1,500) as a professional courtesy, and nets the amount due as $5,000.
By doing this you retain the ability to defend a future “increase” in fees by pulling out the prior invoice and showing the client that you discounted the amount due because you were, for example, aware of the client’s cash and margin problems and you value their business and elected to give them some relief. If necessary, you explain that this clearly implies that you were not offering a permanent, go-forward reduced fee structure.
No one I’m talking with has raised fees across the board for 2010. From that I would state the obvious and recommend you stand pat. I wouldn’t reduce fees because it is so difficult to raise them when the business climate recovers. Using the write down process retains your fee structure while at the same time provides you the opportunity to give selective relief to individual clients.
Now, because this is a business development blog, I want to pitch a way you CAN raise fees. To explain, if you are doing “regular” 1040 and small to medium business returns and compliance work, you are to some extent engaged in a commodity activity. Most of your competitors also provide these services. Your clients know this and everyone is aware there is a community standard range of how much you can charge for that work.
However, when you provide consulting, advice or engage in project work the standard is considerably grayer. If you don’t already do so, please consider scheduling look-ahead planning meetings with (at least) your important clients. And don’t limit your discussion to just the business stuff. Instead, ALWAYS ask about life issues the client may have. For example, if the client is in their 50s or 60s you inquire about their desires about retirement timing, or their thoughts about disposition of their business, etc.
All manner of opportunities can arise from these discussions. Project work such as cash projections, what-if scenarios, coordinating with attorneys re estate planning, etc. are all possibilities. Or, the client may inquire, “Victoria, I’d like to explore how I can acquire one of my competitors. Obviously, there’s the price, but what’s the best way to structure payment of the price? How do we allocate value of, say, good will, inventory and so forth? Does the transaction’s timing have any effect upon my tax exposure?” Obviously, this discussion can result in both project work and consulting/advice. To my way of thinking, these are premium services. This is you operating at your highest professional level. My belief is that by developing these options and solutions you are providing maximum value to your client. You should charge accordingly.
In fact, every accountant I presently work with charges a higher hourly rate (when compared to everyday work) for consulting, advice and project work. Take a look at the hourly rates of local attorneys. While you probably won’t be able to get the same level, their rates do provide a reference point. Specific locations will vary, but as one example, in San Francisco, my clients employ a two-tier structure that pegs their rates $50 - $100 more per hour more for these premium services.
I believe that even in today’s recession you will find clients who not only value the expertise you bring to the table, but will pay your invoice and consider it money well spent.
Note: there are two relevant earlier blogs that address fees: See Pressure To Lower Fees, Parts 1 and 2, dated 7/30/09 and 8/09/09 respectively.
Monday, February 8, 2010
Ouch, Look At Those Write-downs!
Virtually every accountant I’ve spoken with in the past six months has told me their write-downs (or write-offs) have increased, both as a percentage of total hours expended on client work and as a percentage of what can be theoretically invoiced if all hours worked were billable. Some of the larger firms adopt “realization rates” that anticipate a given percentage of staff and/or partner hours will be written down or in some other manner go unbilled. From the feedback I’ve received these percentages have grown also.
The reasons for more write-downs can be complex, but the most obvious driver is pressure from disgruntled clients. The partner reviews the invoice, comes to the realization they’d better reduce the total or possibly lose the client (or simply not get paid), and makes a write-down.
In firms with multiple partners/shareholders, peer pressure about write-downs can be onerous. If partner A is able to bill all their work and partner B is writing down 25% of their invoices, then A may be quite upset with B if the profit pool is an equal split or in some other manner the firm’s profit distribution doesn’t penalize write-downs.
Faced with tightening their belts, some firms have found their partners are doing more of their own work and delegating less. Assuming for a moment the partner’s compensation scheme encourages delegation, we find the reason for the partner doing more of the work is because they can do it more quickly than the staffer and thereby avoid write-downs and the subsequent snarky glances and dark mutterings from their fellow partners.
But, what if the staff are on salary and get paid no matter how many hours they work? Now things can get truly messy because the partner’s failure to delegate can become a double whammy. To explain, the partner retaining the work saves preparation time, but the firm is paying the staffer to sit there. If the staffer’s salary is predicated upon a formula that assumes, say, 1500 hours a year at a charge rate of $125, and he or she doesn’t bill an average of 125 hours per month, then they are “upside down.” In other words, they aren’t being fully utilized and yet the firm is paying them as if they are. The net effect is that delegating work to this staffer is, essentially, free. The firm is going to pay her anyway, so shouldn’t they be given the work?
On the other hand, the partner’s time isn’t free. Failure to delegate means first of all the partner is doing work a less expensive resource can accomplish, but even more painful is the partner is not performing work only he or she can do, i.e. providing management input to the firm and finding new and/or additional work to increase the number of available billable hours (which, stating the obvious, will get that staffer busy again).
Because of their status as shareholders/owners, partners are really the only effective business developers. The combination of ownership, status, experience, contacts, etc. uniquely position them for this role. Staffers CAN’T develop meaningful revenue streams.
If your firm is suffering increased write-downs, this blogger’s recommendation is – Delegate everything you can to staffers (it may even be “free” as explained above);
– Accept that the staffer can’t do the work as quickly as the partner;
– Coach/mentor the staffer so they learn and become more efficient in the future, thereby increasing their future value to the firm;
– Dedicate the time you free up to business development and looking at things you can do to reduce costs and make the firm more efficient (in reasonably well-run firms partners should focus less effort on cost containment because the bottom line upside is much less than adding high quality clients);
– Begin with examining your present (solvent) clients and look for more work you can do for them. This is the lowest hanging fruit on the business development tree. And, put your efforts into finding new clients. Various techniques to do so have been addressed many, many times in this blog over the past couple of years. See, for example, the post explaining how to use a highly pointed newsletter to find niche clients (9/15/09), or tips to make your marketing pay off (6/15/09), or even basic approaches to personal marketing (12/3/09);
– Take an aggressive approach … there are great prospects out there no one is even talking with. Many firms are circling the wagons, cutting costs and hunkering down. Don’t fall into that trap. It’s not just the short term benefit new clients bring, there’s also the inertia you can create and maintain that will pay huge business development dividends when the recovery kicks in.
The reasons for more write-downs can be complex, but the most obvious driver is pressure from disgruntled clients. The partner reviews the invoice, comes to the realization they’d better reduce the total or possibly lose the client (or simply not get paid), and makes a write-down.
In firms with multiple partners/shareholders, peer pressure about write-downs can be onerous. If partner A is able to bill all their work and partner B is writing down 25% of their invoices, then A may be quite upset with B if the profit pool is an equal split or in some other manner the firm’s profit distribution doesn’t penalize write-downs.
Faced with tightening their belts, some firms have found their partners are doing more of their own work and delegating less. Assuming for a moment the partner’s compensation scheme encourages delegation, we find the reason for the partner doing more of the work is because they can do it more quickly than the staffer and thereby avoid write-downs and the subsequent snarky glances and dark mutterings from their fellow partners.
But, what if the staff are on salary and get paid no matter how many hours they work? Now things can get truly messy because the partner’s failure to delegate can become a double whammy. To explain, the partner retaining the work saves preparation time, but the firm is paying the staffer to sit there. If the staffer’s salary is predicated upon a formula that assumes, say, 1500 hours a year at a charge rate of $125, and he or she doesn’t bill an average of 125 hours per month, then they are “upside down.” In other words, they aren’t being fully utilized and yet the firm is paying them as if they are. The net effect is that delegating work to this staffer is, essentially, free. The firm is going to pay her anyway, so shouldn’t they be given the work?
On the other hand, the partner’s time isn’t free. Failure to delegate means first of all the partner is doing work a less expensive resource can accomplish, but even more painful is the partner is not performing work only he or she can do, i.e. providing management input to the firm and finding new and/or additional work to increase the number of available billable hours (which, stating the obvious, will get that staffer busy again).
Because of their status as shareholders/owners, partners are really the only effective business developers. The combination of ownership, status, experience, contacts, etc. uniquely position them for this role. Staffers CAN’T develop meaningful revenue streams.
If your firm is suffering increased write-downs, this blogger’s recommendation is – Delegate everything you can to staffers (it may even be “free” as explained above);
– Accept that the staffer can’t do the work as quickly as the partner;
– Coach/mentor the staffer so they learn and become more efficient in the future, thereby increasing their future value to the firm;
– Dedicate the time you free up to business development and looking at things you can do to reduce costs and make the firm more efficient (in reasonably well-run firms partners should focus less effort on cost containment because the bottom line upside is much less than adding high quality clients);
– Begin with examining your present (solvent) clients and look for more work you can do for them. This is the lowest hanging fruit on the business development tree. And, put your efforts into finding new clients. Various techniques to do so have been addressed many, many times in this blog over the past couple of years. See, for example, the post explaining how to use a highly pointed newsletter to find niche clients (9/15/09), or tips to make your marketing pay off (6/15/09), or even basic approaches to personal marketing (12/3/09);
– Take an aggressive approach … there are great prospects out there no one is even talking with. Many firms are circling the wagons, cutting costs and hunkering down. Don’t fall into that trap. It’s not just the short term benefit new clients bring, there’s also the inertia you can create and maintain that will pay huge business development dividends when the recovery kicks in.
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